If there's a #3, it's not one that I'm quite as adamant about, but don't go into rental investing sideways. If you're going to do it, do it systematically and purposely. And usually that works better with small multi-family properties (YMMV).
Sound advice. I didn't mention it in my first reply, but please note that I am NOT a property owner - I'm just an interested guy who's been doing his homework. My wife and I have been gearing up for our first rental property for about 6 months and will be looking to purchase an investment property - not in our local market - by the end of the year if all goes well.
I started a thread a called "
Tell us about your first rental property", because I wanted to know what lessons people had learned, and I wanted to avoid the major pitfalls. Here are my main takeaways from that thread and my own experiences:
1) Don't become a landlord by accident (i.e. inheriting a property you wouldn't buy and hanging on to it, or moving away from your area and renting out your former primary residence despite it being a money-loser). Approach the purchase deliberately.
2) If you want to make life easier, don't involve family as business partners or as tenants.
3) Run extremely realistic income / expense numbers for your property, and include lumpy (not ever month) or hidden expenses (upcoming repairs, cost of vacancies). Use this as a key part of your decision making. Lots of real estate horror stories involve people who ran no numbers, or penciled out numbers which were not at all realistic / complete.
4) Don't count on supernormal appreciation to save your ass on a bad deal. If you're forecasting that your rents or properties will go up far higher than general GDP growth, you are likely rolling the dice.
5) Tons of well-meaning friends and family who have never owned rental property will offer you advice on rental markets and techniques. You can thank them and ignore 95% of what they say.
6) You can also ignore lots of the 'get rich quick in real estate with no money down' books. Most of the real estate books out there are, frankly, utter shit. A small proportion are not - a quick rule of thumb is that if it contains far, far less hype than the "get rich quick" books, and lots more legalese, how-tos, and formulae - it may be decent.
6) Buy smart, manage well. It is far easier to STAY out of trouble with real estate investing than it is to GET out of trouble.
Perhaps I'm breaking rule #5 since I don't own property yet! But those are my findings so far. Hope that helps!